Washington state regulators set stricter limits on pot production

OLYMPIA, Washington (Reuters) - Washington state marijuana regulators moved on Wednesday to curtail the size and number of pot farms it will allow to serve the state’s nascent recreational cannabis market, citing the need to prevent excess supply from illicitly leaving the state.

Washington state and Colorado voted to legalize the recreational use of marijuana in 2012 even as pot remains illegal under federal law, and Washington plans to begin licensing retail pot stores in June. Colorado’s first recreational pot stores opened last month.

The state had initially set no limits on the number of pot producers it would license and allowed individuals to apply for up to three licenses, each of up to 30,000 square feet in size.

Under the revised rules, each applicant will be allowed only a single license and will be permitted to grow on 70 percent of the initial maximum plot size. Regulators hope the changes will reduce the projected footprint of pot plantations statewide by two-thirds, to under 300 acres, said Randy Simmons, deputy director of the state’s Liquor Control Board.

“Some of this will be self-correcting as operators fall out,” said Simmons, whose Liquor Control Board has been tasked with regulating the state’s marijuana industry.

Critics contend that the move is unfair to prospective growers, many of whom have signed leases based on the initial rules.

“It’s coming too late in the game,” said Hilary Bricken, a Seattle-based marijuana business lawyer. “Many growers made decisions on properties six to nine months ago and are now going to pay the price.”

State regulators have received about 2,200 license applications to grow marijuana, out of about 7,000 pot business applications overall, according to the board.

The board plans to issue licenses to an initial batch of roughly 20 growers early next month and will continue to approve growing and processing licenses as it goes through applications over the next several months, Simmons said.

Thus far, about a quarter of all reviewed pot license applications have been disqualified, mostly for proximity to areas where children congregate or for a failure to list valid in-state financiers, Simmons said. The disqualification rate is expected to climb to 30 percent of all applications, he said.

Also on Tuesday, the board said it will issue licenses to pot businesses even in areas where local bans or moratoriums are in place. Bans have been enacted in a handful of cities, including Yakima and Wenatchee in central Washington state and in unincorporated areas of Pierce County, south of Seattle.

Last month, Washington state Attorney General Robert Ferguson issued an opinion confirming the right of local governments to ban pot businesses, disappointing both state regulators and crafters of the voter-approved initiative creating the state’s pot law.

Pot business hopefuls in areas with local restrictions will also be given the option of withdrawing their license applications for a refund, Simmons said.